California is often seen as a model for bad housing policy, with exclusionary zoning practices, environmental rules, and other regulations driving up the cost of housing until it is unaffordable for many state residents. Unfortunately, the Golden State is no longer an outlier. Other states are increasingly following California’s route to unaffordable housing.
In a Policy Analysis released today, Keeping North Carolina’s Housing Affordable: A Free Market Solution, I look at one such state. Like California 20 years ago, people are being drawn to the Tar Heel State by a combination of good weather and strong economic growth. Unfortunately, new housing construction has failed to keep up with North Carolina’s rapidly growing population. Since 2010, the price of a house has increased by 31.5 percent, while rents have risen by 14.6 percent. The average fair market rent, which represents the 40th percentile of gross rent, for a two-bedroom apartment in North Carolina now exceeds $960 per month, or more than $11,500 per year.
While no single factor is responsible for North Carolina’s scarcity of housing, many communities in the state have exacerbated the problem by making it difficult to build enough housing to meet demand. Restrictive zoning limits the type and amount of housing that can be built. These regulations include prohibiting multifamily housing, setting minimum lot sizes and parking requirements, mandating setbacks, and limiting the height of houses. Basic economics suggest that artificially restricting supply in the face of growing demand will lead to higher prices.
Exclusionary zoning imposes consequences on North Carolinians that extend far beyond the boundaries of the local jurisdictions that create those regulations. The state’s economic growth is slower than it might otherwise be. Poverty is more concentrated and more difficult to escape. Landlord-tenant relationships are disrupted. And the state is more racially segregated than it would otherwise be.
If North Carolina hopes to avoid a Tar Heel version of California’s dysfunctional housing market, it needs to dismantle exclusionary zoning practices and make it easier to build more housing. A few local jurisdictions, notably Raleigh and Durham, have taken modest steps toward reform in recent years, but NIMBY forces remain powerful. In the absence of local action, the state legislature should intervene. Bipartisan legislation to reform zoning statewide was introduced last year. While not perfect, it provides a starting point for debate in the 2023 session.
I will be talking about this and more at an event on December 8th co-hosted with the John Locke Foundation. The event will be live-streamed, and you can sign up here.
Live Online Special Event
Keeping North Carolina’s Housing Affordable
December 8, 2022 • 12:30 PM — 3 PM EST
With North Carolina’s population boom, keeping housing affordable is more critical than ever before. This year, tens of thousands have decided to call North Carolina home. But will they be able to afford one? Join the Cato Institute and the John Locke Foundation for this essential and watershed discussion. We will hear from experts, stakeholders, and legislators on the solutions we can pursue to keep North Carolina a place that people call home.
